This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.
NJSBA to Supreme Court: Affirm finding of unethical Avvo practices
The New Jersey State Bar Association (NJSBA) filed an amicus curiae brief opposing a challenge to a joint advisory opinion that found Avvo’s legal service programs improperly require fee splitting with a non-lawyer and pay an impermissible referral fee to attorneys. Joint Opinion 732/44/54, issued by the Advisory Committee on Professional Ethics, Committee on Attorney Advertising and Committee on the Unauthorized Practice of Law, is being challenged by Consumers for a Responsive Legal System (Responsive Law), a self-described nonprofit organization advocating “to make the civil legal system more affordable, accessible and accountable to its consumers.” The brief was written by the association’s assistant executive director and general counsel, Sharon Balsamo, and its past president, Thomas H. Prol.
Avvo’s practice of “sharing in the legal fee charged for those services under the guise of ‘marketing fees’…clearly violates the prohibition of the [Rules of Professional Conduct]…and requires no further review from the Supreme Court,” said the NJSBA in its brief. It further urged the Supreme Court that should it take certification, that it affirm the joint opinion.
The joint opinion considered the legal service programs of Avvo, LegalZoom and Rocket Lawyer, specifically analyzing whether a lawyer’s participation in these services constitutes impermissible fee sharing with non-lawyers in violation of RPC 7.2; a lawyer’s participation in these services interferes with the lawyer’s independent judgment in violation of RPC 7.2; the companies are an impermissible referral service in violation of RPC 7.2; and the services violate R. 1:28A-2 requiring lawyers to establish an IOLTA account in which to hold client funds until they are earned. The Supreme Court committees rejected the notion that these services unduly interfere with the lawyer’s professional judgment; however, they concluded that Avvo’s pay-for-service plan violated RPC 5.4(a) because the participating lawyer accepts a fee for the legal service and then pays a marketing fee to Avvo, thus constituting impermissible fee sharing.
In its challenge to the joint opinion, Responsive Law argued that the opinion limits access to justice and violates the antitrust act because of its anticompetitive impact. The NJSBA rebutted those arguments by challenging Responsive Law’s standing to challenge the joint opinion; underscoring the plain language of the RPCs finding impermissible fee sharing with non-lawyers; and pointing out that the joint opinion is advisory only, with ultimate enforcement vested in the Supreme Court, and does not, therefore, implicate the Sherman Antitrust Act, which places heightened requirements on enforcement action undertaken by private market participants.
Finally, the association pointed to a number of states that have also found Avvo’s marketing fee structure to be violative of the RPCs. Ohio, South Carolina, Virginia, and Pennsylvania have reached similar conclusions to New Jersey. “The fact that numerous other states’ ethics entities have come to the same conclusion about the Avvo fee-sharing arrangement fortifies the soundness of the committees’ conclusion in the joint opinion,” said the NJSBA.
The association continues to monitor the issue.